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LATVIA

Baltic crisis puts pressure on krona

The Swedish krona fell back against the euro on Monday as markets remained shaky on the back of concerns over Swedish bank exposure to the troubled Baltic state economies.

The uncertain situation affecting Baltic financial markets has a direct impact on the krona, according to Lars Christensen, an analyst at Danske Bank, who pointed out that Swedish banks have outstanding credits of up to 500 billion kronor ($63.4 billion) in the region.

Christensen added that the krona is also being battered by the general aversion to risk on the currency markets and as a result of stock market falls.

The krona dipped to 10.98 kronor per euro by lunchtime on Monday but quickly recovered to 10.94.

Against the dollar the krona fell to 7.91 by 1pm, down from 7.77 on Friday.

“Risk aversion on the markets is normally negative for the Swedish krona. But the Baltic effect persists, there is no doubt about that. Both for the Swedish krona and for the eastern and central European currencies,” Christensen said to news agency TT.

The Latvian central bank has been forced to spend 237.3 million euros ($329.2 million) shoring up the country’s currency over the past week in an attempt to arrest the slide against the major currencies.

The bank’s monetary policy is aimed at preparing the country for the adoption of the euro within 3-4 years; a policy that has been put under scrutiny as a result of the deep recession and financial crisis that has affected the country.

Lars Christensen is among those waiting on a decision by creditors including the IMF, the EU and Sweden, which is expected in the beginning of next week.

“It would be very positive for the krona if they were to secure an IMF payment. That would solve the short term financing problems anyway,” he said.

Clarification: An earlier version of this article incorrectly asserted that the krona had fallen to a record low against the euro.

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CENTRAL BANK

Norway central bank mulls stepping in to prop up falling krona

The central bank of Norway said Thursday it was considering intervening to stop the fall of the Norwegian krone, which is taking a beating from the economic fallout of the new coronavirus.

Norway central bank mulls stepping in to prop up falling krona
The headquarters of Norway's central bank in Oslo. Photo: Mahlum/Wikimedia Commons
Faced with the risk of recession and a sharp drop in the price of oil, of which Norway is Western Europe's largest producer, the Norwegian krone is buckling under.
   
Since the beginning of the year, when the currency was already weakened, the dollar has appreciated against the krone by more than 20 percent and the euro by almost 18 percent.
   
The drop intensified on Wednesday and according to business news site e24.no the currency had never weakened more in a day since the country abandoned its fixed exchange rate regime in 1992.
   
“In recent days, there has been an extraordinary situation in the market for Norwegian kroner,” Norges Bank, the country's central bank, said in a statement.
   
“Against this background Norges Bank is continuously considering whether there is a need to intervene in the market by purchasing Norwegian kroner,” it said.
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